Investing in Marijuana Growing Technologies
Who would have thought that in some U.S. States, there are now as many varieties of marijuana to choose from as there are fast food outlets for lunch. It somewhat pains those of us who remember what things used to be like. Back in the day, there was usually only one strain per dealer. Sometimes the strains were “beasters” – generic green buds from BC – and the price point matched the quality. Other times, the strains were nothing short of incredible – like Tupp – a potent, skunk bud that stunk like a skunk so bad, you needed to store those beautiful, fluffy colas in industrial strength Tupperware containers to mask the pungent odor.
Yes, in the good old days you could also make a decent amount of cash as a marijuana grower. If you’re part of Generation X, you might have known some “marijuana growers”. Of course, it’s not likely you knew any serious growers. Only amateurs would admit to anyone they were doing something so illegal, so it was more likely than not that the “growers” you knew were college kids who got ahold of The Marijuana Growers Handbook and decided to give it a go:
The end result would usually be a few feeble-looking plants withering away under the oppressive glow of a high-pressure sodium grow light hung from the top of a small closet with the walls coated in aluminum foil. Now that we’ve entered an age where growers measure their output in tons, the technology has stepped up a few notches. In order to get a better handle on high-tech grow operations, look no further than Wexus Technologies. We sat down with Wexus CEO and Co-founder, Chris Terrell, to discuss the evolution of marijuana growing technologies.
Growing Cheaper Marijuana with IoT
Wexus was recently featured in an article we wrote on 6 IoT in Agriculture Solutions from AgTech Startups, and we learned that the company’s solution is increasingly being used by marijuana growers who use IoT sensors to measure costly inputs for growers like electricity and water. Wexus connects with utility data to track irrigation pumps, buildings, processing equipment & solar arrays via cloud technology. The system can then feed all the big data generated from the Internet-of-Things (IoT) sensors “in the field” and turn it into actionable insights that help growers save money. A quick look at the Wexus customer list shows that farmers don’t need a whole lot of convincing to adopt high-tech grow solutions.
This made us wonder just how many other startups out there are building grow-tech solutions for today’s budding “marijuan-trepreneurs”. Turns out, there aren’t a whole lot. One of the companies that Wexus currently works with is Braingrid, a startup that’s positioning themselves as a provider of leading-edge technology to the cannabis industry.
Big Data Begets Artificial Intelligence
Founded in 2013, Toronto startup Braingrid has taken in around $2.9 million in funding to date and delivered an “affordable, scalable and quick-to-install sensor platform for cannabis cultivators.” In June of this year, they announced a possible reverse takeover with a publicly traded firm on the Toronto Stock Exchange (TSXV) which means that investors would be able to buy shares in the company. According to Mr. Terrell, “the Canadian venture capital market – where Braingrid is based – is not nearly as robust as the U.S., hence the need for a lot of Canadian startups to “go public” with a reverse takeover and a ticker symbol in order to raise growth capital.” All that money will be used to continue developing their platform which the company describes as follows:
Braingrid has commercialized a proprietary device with patented technology called the “Sentroller”, which in the case of cannabis, is installed throughout licensed cannabis facilities to collect key measurements about a facilities’ performance. To do this, Sentrollers connect to nearly any sensor such as temperature, humidity and CO2. This data is then communicated wirelessly in real-time to a Braingrid gateway in the facility, which in turn sends the data via cellular modem to secure cloud-based servers. This data can then be accessed by customers via online dashboards and reports. In addition, the platform can send email alarms to the customer when out-of-bounds conditions are sensed. Using Braingrid’s products takes minutes as opposed to days or even weeks.
While reverse takeovers have always left a bad taste in our mouths, Braingrid is a legitimate company that has seen interest from accredited, retail and even institutional investors who acknowledge Braingrid’s role in legitimizing the industry. Given that today’s cannabis “investors” have about as much sense as people who “invest” in utility tokens, this could be a good time to make hay while the sun shines and raise some much-needed money for growth at quite high valuations.
Despite the cannabis market’s volatility, Braingrid “increases growers’ profits, reduces their risks and insulates them from losing margin with the decline in per gram prices…” said Michael Kadonoff CEO of Braingrid. Just last month, Braingrid made an announcement about the use of artificial intelligence for data analytics. In that announcement, they talked about their strategic agreement with Ample Organics. Let’s take a closer look at Ample Organics who came out of nowhere to become Canada’s number one seed-to-sale solution.
Ample Room for Growth
The idea of a seed-to-sale solution is kind of what it says on the tin. It’s largely a compliance system that tracks the marijuana from the exact location from which it was grown until it gets sold at a point-of-sale system. That sort of traceability will probably be mandated by law if it isn’t already, and that’s why – about a year ago – we wrote about 9 Cannabis Startups with Seed-to-Sale Solutions. Ample Organics wasn’t on that list, but today claims to be used by more than 70% of Canada’s licensed cannabis producers. Founded in 2014, the Toronto, Ontario startup has taken in an undisclosed amount of funding to build a seed-to-sale platform that’s now had more than 36 tons of marijuana processed through representing over 1 million orders. Seems like the sort of scale that you would need to start generating useful amounts of big data. The question is, how involved are they in the actual growing?
When looking at the Ample Organics platform, it seems that they just stop short of diving into the actual grow operation. They’re more focused on what happens right when the plant becomes ready to harvest. Prior to that, they know when the seed was planted so they can easily measure things like yield. But what about a solution that tells you the appropriate amounts of fertilizer, water, light, etc. needed to maximize your yield while reducing cost? That’s where platforms like Braingrid come into play:
The sensors in the field collect information like temperature and moisture which is then relayed to “the cloud” which gives you all these insights on your grow operation which over time will only get better as the AI algorithms obtain more delicious data to munch on. It all sounds good and that, but we wonder if the focus on a reverse merger is detracting from the focus that needs to be placed on growing as quickly as possible – much like Ample Organics did to achieve their market-leading position. Once such a position is achieved, a company like Osram just might step up and acquire you.
Osram and Smart Farming
For evidence that exits exist for marijuana growing technology startups, look no further than German lighting manufacturer Osram (OSR:GR) and their acquisition of Fluence Bioengineering. If you’re not familiar with Osram, they’re a $4 billion publicly-traded lighting company that wants to become “the leading provider in smart farming solutions.” Here’s an excerpt from a recent article on Osram’s website:
“Our vision is the intelligent, automated farm of tomorrow,” says Timo Bongartz, head of Smart Farming at OSRAM. “To achieve this, we are working on a holistic system that extends beyond intelligent light management. The goal is the overall networking of plant cultivation.” Integrated sensors ensure ideal growth conditions: They regulate and control environmental factors such as light, temperature, humidity and CO2 content. Optical sensors monitor plant growth and health, while a central software platform links up the logistics chain, from the fertilizer to the harvesting machine and the buyer.
The article then goes on to talk about Osram’s acquisition of Fluence Bioengineering, one of the world’s leading providers of smart lighting in vertical farms and greenhouses. Rumor has it that Fluence was one of the biggest players in the marijuana growing space with their broad selection of lighting products for grow rooms. At the time they were acquired in May of this year, they had around 95 employees and “mid-double-digit millions of dollars” in 2017 revenues. Just to put those numbers in perspective, Osram had 2017 revenues of over $4 billion and 30,000 employees.
Fluence isn’t the only acquisition Osram has made. The same month they acquired Fluence, they also “acquired a stake in Canadian startup Motorleaf, an artificial intelligence company focused on bringing actionable, data-driven insights to greenhouse and indoor farm operators.” Founded in 2015, Motorleaf has taken in $2.9 million so far. Osram also holds a stake in the horticulture startup Agrilution since 2017. Founded in 2013, German startup Agrilution has taken in $5.2 million in funding so far to develop their smart growing platform which also appears to use all the works like IoT sensor and artificial intelligence. It’s all part of Osram’s pivot from boring old lighting to exciting new growth areas – like smart farming, whether that’s for cannabis or tomatoes.
When analyzing these firms, we see different approaches when it comes to marketing. Some companies specifically cite their target market as cannabis growers (Braingrid) while others make it a point to demonstrate that their technology is applicable across multiple growing applications first (Wexus), then test the waters in the cannabis space. After talking to cannabis growers and gauging product fit, Wexus found that “energy costs and energy management are one of the biggest pain points that nobody is talking about. “There are few IoT players in cannabis right now,” said Mr. Terrell. “This is such an early market that we’re seeing companies come & go, but the stronger players who execute well are starting to thrive.”
Retail investors who may want to buy shares in Osram will need to open a brokerage account with a firm like Zacks Trade which lets you trade stocks on international exchanges.
Are you paying too much in transaction fees to your broker? Check out a brokerage firm called Zacks Trade that's offering $1 trades for U.S. stocks and options until 2019. After that, you'll pay just $3 a trade or a penny a share, whichever is greater. It's one of the cheapest brokers out there and you can also trade stocks on foreign stock exchanges. Trade US stocks and options for as low as $1 per order until July 4, 2019.